Morning Bid: TSMC steadies chip ship, ECB set to ease

A look at the day ahead in U.S. and global markets from Mike Dolan

Tech-heavy stock markets are set to breathe a sigh of relief on Thursday as the world's largest chipmaker beat the street and eased gnawing doubts about semiconductor demand worldwide and jitters about the wider artificial intelligence theme.

After a cloudy outlook from Europe's ASML (AS:ASML ) earlier this week sideswiped chip stocks everywhere, Taiwan Semiconductor Manufacturing said on Thursday it expects sustained growth as it reported a forecast-beating 54% jump in profits and soaring demand for chips used in AI.

TSMC, the dominant producer of advanced chips used in AI applications and whose customers include Apple (NASDAQ:AAPL ) and Nvidia (NASDAQ:NVDA ), has become a bellwether for the AI story and its shares jumped 6% in Frankfurt after the earnings report.

Nvidia shares were also up another 2% in out of hours trade.

TSMC is spending billions of dollars building new factories overseas, including $65 billion on three plants in the U.S. state of Arizona, although it has said most manufacturing will remain in Taiwan.

With Wall Street index futures higher again ahead of Thursday's bell, the news from Taiwan may well lift both the S&P500 and Nasdaq back to record highs.

Helped by a strong earnings season so far for the big U.S. investment banks, the wider market raced ahead on Wednesday. The small cap Russell 2000 clocked it best close in almost three years and Dow Jones blue chips set another record close after the index secured a foothold above the 43,000 mark.

Streaming giant Netflix (NASDAQ:NFLX ) tops the diary later, with investors looking for signs its nascent ad revenue business is accelerating. That's important as it's set to report about 4 million new subscribers - its lowest addition in six quarters following a boom on its password-sharing crackdown.

Netflix shares are up 44% for the year so far.

With the European Central Bank set to deliver its third interest rate cut of the year later on Thursday - its first back-to-back cut in 13 years - the broader interest rate picture was supportive too.

The euro fell to its lowest level since early August against a generally stronger dollar ahead of the ECB decision.

European stocks pushed higher after a shaky week of disappointments from ASML and luxury goods maker LVMH, both hit by wobbling Chinese demand and a brewing trade war between Brussels and Beijing.

China's markets underperformed once again and the offshore yuan touched its weakest level in almost two months as a lack of fresh stimulus from a closely-watched housing policy briefing left some investors disappointed.

China will expand a "white list" of housing projects eligible for financing and increase bank lending for such developments to 4 trillion yuan ($562 billion), Minister of Housing and Urban-Rural Development Ni Hong said.

But analysts said the details just fleshed out previously announced support and some of the numbers underwhelmed.

Property stocks traded in China and Hong Kong tumbled 7.9% and 6.7% respectively - reversing gains of the previous day.

China reports third-quarter GDP numbers on Friday - and the annual growth rate over the three months is expected to have slowed to 4.5% from 4.7% the prior quarter.

Back on Wall Street, Treasuries were steady, with the 10-year yield retaining a 4% handle ahead of a stream of retail, industrial and weekly jobless data for last month.

With the labor market under the microscope at the Federal Reserve as it mulls its next interest rate move, distortions in jobless claims due to recent storms and strikes have made the number difficult to read.

Still, another quarter-point Fed rate cut next month is almost fully priced in futures markets and there was encouraging news on the inflation front at home and abroad.

U.S. import prices fell by the most in nine months in September amid decreases in the costs of energy products and food.

And despite Middle East tensions, China-related global demand worries for next year have kept a lid on oil, leaving U.S. crude clinging on to $70 per barrel and down almost 20% on this time last year.

In deals news, shares of travel booking website Expedia (NASDAQ:EXPE ) Group jumped 8% in after-hours trading after the Financial Times reported that ride-hailing giant Uber (NYSE:UBER ) explored a possible bid for the company. Uber shares were down about 2%.

Key developments that should provide more direction to U.S. markets later on Thursday:

* European Central Bank policy decision and press conference with ECB President Christine Lagarde

* US corporate earnings: Netflix, Snap-on (NYSE:SNA ), Intuitive Surgical (NASDAQ:ISRG ), Blackstone (NYSE:BX ), Travelers (NYSE:TRV ), Truist, M&T, Elevance Health, Marsh & McLennan, Huntington Bancshares (NASDAQ:HBAN ), KeyCorp (NYSE:KEY )

* US September retail sales, industrial output, weekly jobless claims, October Philadelphia Fed business survey, Oct NAHB housing index, August business/retail inventories, August TIC data on Treasury holdings

* Federal Reserve Bank of Chicago President Austan Goolsbee



* European Commission President Ursula von der Leyen and European Council President Charles Michel holds a press conference after European Union summit

* U.S. President Joe Biden visits Germany

Source: Investing.com